Competing Economic Plans for 2012

Wednesday, January 04, 2012 - 03:46 PM

As the GOP field narrows itself down we wanted to take a closer look at each candidate's economic plan for the 2012 election. Which candidate is addressing your concerns about the economy, and what initiatives will have a positive impact on the size of your wallet? American Public Media's Marketplace has a good shapshot of each candidate's economic plan. We've put a more comprehensive view of the candidates' positions below.

On Thursday's show, Takeaway Washington correspondent Todd Zwillich will try to explain the difference between each economic vision. Have a question about who will address your concerns? Tell us what issue you'd like the next president to tackle at 1-877-8-MY-TAKE.

Newt Gingrich

Stop the 2013 tax increases to promote stability in the economy. Job creation improved after Congress extended tax relief for two years in December. We should make the rates permanent.

Make the United States the most desirable location for new business investment through a bold series of tax cuts, including: Eliminating the capital gains tax to make American entrepreneurs more competitive against those in other countries; Dramatically reducing the corporate income tax (among highest in the world) to 12.5%; Allowing for 100% expensing of new equipment to spur innovation and American manufacturing; Ending the death tax permanently.

Move toward an optional flat tax of 15% that would allow Americans the freedom to choose to file their taxes on a postcard, saving hundreds of billions in unnecessary costs each year. This optional flat tax system will preserve deductions on charitable giving and home ownership, and create a new personal deduction of $12,000 for every American. This deduction is well above the current poverty level, ensuring that this new system does not unfairly target the poor.

Strengthen the dollar by returning to the Reagan-era monetary policies that stopped runaway inflation and reforming the Federal Reserve to promote transparency.

Remove obstacles to job creation imposed by destructive and ineffective regulations, programs and bureaucracies. Steps include: Repealing the Sarbanes-Oxley Act, which did nothing to prevent the financial crisis and is holding companies back from making new investments in the U.S; Repealing the Community Reinvestment Act, the abuse of which helped cause the financial crisis; Repealing the Dodd-Frank Lawwhich is killing small independent banks, crippling loans to small businesses and crippling home sales; Breaking up Fannie Mae and Freddie Mac, moving their smaller successors off government guarantees and into the free market; Replacing the Environmental Protection Agency with an Environmental Solutions Agency that works collaboratively with local government and industry to achieve better results; and Modernizing the Food and Drug Administration to get lifesaving medicines and technologies to patients faster.

Implement an American energy policy that removes obstacles to responsible energy development and creates jobs in the United States.

Balance the budget by growing the economy, controlling spending, implementing money saving reforms, and replacing destructive policies and regulatory agencies with new approaches.

Repeal and replace Obamacare with a pro-jobs, pro-responsibility health plan that puts doctors and patients in charge of health decisions instead of bureaucrats.

Fundamental reform of entitlement programs with the advice and help of the American people. Read an extended white paper on this here.

Ron Paul

Refuse to further raise the debt ceiling so politicians can no longer spend recklessly.

Fight to fully audit (and then end) the Federal Reserve System, which has enabled the over 95% reduction of what our dollar can buy and continues to create money out of thin air to finance future debt.

Legalize sound money, so the government is forced to get serious about the dollar’s value.

End the corporate stranglehold on the White House.

Drive down gas prices by allowing offshore drilling, abolish highway motor fuel taxes, increase the mileage reimbursement rates, and offer tax credits to individuals and businesses for the use and production of natural gas vehicles.

Eliminate the income, capital gains, and death taxes to ensure you keep more of your hard-earned money and are able to pass on your legacy to your family without government interference.

Oppose all unfunded mandates and unnecessary regulations on small businesses and entrepreneurs.

Mitt Romney

Mitt Romney will rebuild the foundations of the American economy on the principles of free enterprise, hard work, and innovation. His plan emphasizes critical structural adjustments rather than short-term fixes.It seeks to reduce taxes, spending, regulation, and government programs. It seeks to increase trade, energy production, human capital, and labor flexibility. It relinquishes power to the states instead of claiming to have the solution to every problem.

Any American living through this economic crisis will immediately recognize the severity of the break that Mitt Romney proposes from our current course. He is calling for a fundamental change in Washington's view of how economic growth and prosperity are achieved, how jobs are created, and how government can support these endeavors. It is at once a deeply conservative return to policies that have served our nation well and a highly ambitious departure from the policies of our current leadership. In short, it is a plan to get America back to work.

Eliminate the cap on deductions for losses incurred in the sale of a principal residence;

Cut the corporate income tax rate in half to make our businesses competitive around the world, from 35% to 17.5%;

Eliminate the corporate income tax for manufacturers to spur middle income job creation in the United States and benefit from the job multiplier effect in manufacturing;

Increase the Research & Development Tax Credit from 14% to 20% and make it permanent to spur on innovation in America;

Eliminate the tax on repatriated taxable corporate income invested for manufacturers equipment investment, 5.25% corporate tax rate on other repatriated income invested in the USA, and 100% expensing for new business equipment

Rick Perry

America’s tax code is broken. American families and businesses spend more than 6 billion hours and hundreds of billions of dollars each year attempting to comply with the filing requirements of our nation’s increasingly complex tax code. One study estimates that annual tax compliance costs will reach $483 billion by 2015 if no fundamental reforms are made to the tax code. The Internal Revenue Service’s (IRS) own Taxpayer Advocate Service testified before Congress that the current tax code imposes excessive compliance burdens, is filled with special tax breaks, creates opportunities for abuse, and promotes non-compliance. Over the last decade the federal tax code has been changed 4,428 times – an average of more than once a day – including 579 new changes in 2010 alone.The current tax code is more than 3 million words long; the mere instructions accompanying the 1040 form exceed 100 pages.

Institute Individual Flat Income Tax Rate of 20%

By implementing a simple and optional flat tax that will allow Americans to file their taxes on a postcard, up to $483 billion a year could be saved by American families and businesses in reduced compliance costs alone. A simpler, flatter tax code – free from the dozens of individual carve-outs that make the code so incomprehensible – will remove the disincentives to work, entrepreneurial risk-taking, and investment that form the foundation of a strong and vibrant economy.

Allow Individuals to Choose Between Existing Tax Code or New Flat Tax System

Under the new flat tax system, taxpayers will have the ability to opt-in to the new system or remain under the existing tax code. Those families or small business owners who made investment decisions years ago based upon the structure of the existing tax code will have the freedom to remain in the current system if they so choose. And taxpayers who desire a simpler, less expensive system are free to move into the optional new flat tax system and take advantage of a postcard-sized tax return that could be filled out in minutes.

Although the proposed flat tax system will not include most special tax credits or deductions embedded within the existing system, families and business that made investment decisions years ago based on the existence of those deductions or credits will still have the option to take advantage of those deductions and credits by remaining within the existing tax system. However, the new optional flat tax system will also include deductions for mortgage interest, charitable contributions, and state and local taxes.

Eliminate Tax on Social Security Benefits

Because the Social Security system is structured as a pay-as-you-go system where current workers largely provide benefits to current retirees, it makes little sense to tax the benefits of current retirees in order to provide benefits to current retirees. Approximately 17 million Social Security beneficiaries, the vast majority of whom make less than $50,000 each year, are currently forced to pay income taxes on their benefits. Today’s senior citizens who paid into the Social Security system for generations should not be taxed yet again on their Social Security benefits. For over 40 years Social Security income was earned-tax free; it was not until 1983 that Congress changed the law and explicitly authorized a new tax on Social Security benefits. Under the optional flat tax system, the original tax treatment of Social Security benefits will be restored Social Security income will again be tax-free.

No Federal Sales Tax or Value-Added Tax

The new flat tax system will have no federal sales tax or business value-added tax (VAT). When added to existing federal income taxes and state and local income sales taxes, a national sales tax would be highly regressive. Low-income families spend a much higher percentage of their incomes on food and gas than do those with considerable wealth. For example, a household earning $25,000 each year would spend roughly 40% of its income on food, utilities, and health care, while a household earning $130,000 each year would pay less than 15% of its income on those three items.

Eliminate Tax on Qualified Dividends and Long-Term Capital Gains

The quickest way to spur economic growth is to leave money in the hands of the American people and to encourage the movement of capital. Eliminating the tax on qualified dividends and long term capital gains will free up literally hundreds of millions of dollars the American people currently are sitting on to avoid a tax on the gain – a tax that is a “second” tax on their money. Between the economic recession, housing market collapse, and decline of the stock market in recent years, American families have lost trillions of dollars worth of their hard-earned savings. As big banks received billions in taxpayer bailouts and watched their profits soar, working Americans watched helplessly as the value of their homes, retirement accounts, and stock portfolios dwindled. By eliminating the tax on qualified dividends and long-term capital gains, entrepreneurs and small business owners can unleash capital to spur economic activity and the growth of the American economy.

Eliminate the Death Tax

The federal estate tax is defined by the Internal Revenue Service as “a tax on your right to transfer property at your death.” Under current law, the tax is temporarily set at the rate of 35 percent with an exemption of $5 million. On January 1, 2013 the estate tax is set to return at a top marginal rate of 55 percent (with an additional 5% surtax for certain estates) on all assets above a $1 million exemption amount. The estate tax is paid by the recipients of an inheritance and is due within 9 months of the decedent’s death. If the heirs do not have sufficient cash, personal property and business assets must be sold to pay the tax. In the case of family business owners and farmers, the tax often exceeds the ability of the family to pay. These heirs are consequently forced to sell off part, if not all, of their enterprise in order to pay the tax. Eliminating the death tax is necessary to protect family businesses, farms and jobs.

Eliminate Corporate Loopholes and Special-Interest Tax Breaks

Many Americans are rightly outraged by news stories that corporations like GE somehow pay nothing in taxes after earning more than $14 billion in profits. Due to the mind-boggling complexity of the tax code, large corporations can implement the most effective tax avoidance strategies money can buy, while American taxpayers are forced to send thousands of dollars to the federal government instead of spending it on their families. And unlike small businesses that cannot afford to house an army of lawyers and tax accountants, large and sophisticated corporations have the means to find and use every tax avoidance strategy that lies buried in the tax code. The myriad tax breaks, loopholes, and so-called tax expenditures available within the corporate tax code need to be phased out over time to ensure a level playing field for family-owned small businesses and multi-national corporations.

The best way to prevent Congress from stealing money from the Social Security trust fund is to allow young Americans to contribute a portion of their earnings to an account with their names on it – a personal retirement account that can never be raided by Washington politicians. Young workers deserve the opportunity to have ownership of their Social Security contributions, to seek a market rate of return if they so choose, and to leave their retirement savings to their dependents when they die. When individual Americans have ownership of their Social Security contributions, their benefits cannot be held hostage or used as bargaining chips by Washington politicians who cannot figure how to pass a budget or keep the government running.

The current “worldwide system” of corporate taxation used by the U.S. creates significant incentives for American companies with foreign subsidiaries to leave profits overseas instead of investing them in the U.S. The worldwide system of taxation taxes overseas income first at the tax rate in the country where the income is earned and then a second time when profits are brought back to the U.S. In essence, income earned in a foreign tax jurisdiction can be tax-deferred until it is brought back to the U.S. Under a territorial system, corporate profits would be taxed only once – in the country where the income is earned. When combined with a lower corporate tax rate, transitioning to a territorial system of taxation would make the U.S. far more competitive with other countries, increasing economic growth and creating more jobs for American workers.

Allow Locked-Up Overseas Capital to be Brought Back to the U.S. at a Reduced Tax Rate

More than $1 trillion in income is stuck overseas due to the current complicated U.S. treatment of foreign-earned corporate income according to numerous studies from researchers on both sides of the political divide. Although a territorial system of taxation eliminates the issue of locked-up overseas income going forward, a reduced tax rate on repatriated earnings can help attract capital that has been left overseas since the most recent repatriation holiday in 2004.

Social Security Reform Principles

Social Security reform that makes the program sustainable for the long-term should follow three simple principles:

Preserve benefits for current and near-term retirees,

Stop the raids on the Social Security trust fund, and

Give younger workers a true ownership stake in their contributions to Social Security.

Protect the Social Security Trust Fund

When the Social Security system collects more in receipts than it pays out in benefits, the surplus funds should be off-limits to Washington politicians. The current Social Security trust fund balance of over $2.6 trillion represents each and every dollar pilfered from Social Security by spendthrift Washington politicians who treated the program as their own personal piggy banks.

Give Younger Workers the Opportunity to Own Their Social Security Contributions

The best way to prevent Congress from stealing money from the Social Security trust fund is to allow young Americans to contribute a portion of their earnings to an account with their names on it – a personal retirement account that can never be raided by Washington politicians. Young workers deserve the opportunity to have ownership of their Social Security contributions, to seek a market rate of return if they so choose, and to leave their retirement savings to their dependents when they die. When individual Americans have ownership of their Social Security contributions, their benefits cannot be held hostage or used as bargaining chips by Washington politicians who cannot figure how to pass a budget or keep the government running.

Gradually Increase the Full Retirement Age Due to Longevity Increases

Thanks to marvelous innovations in medical care since Social Security was first created, Americans are now living far longer than anyone expected in the 1930′s. Average life expectancy has increased by 14 years for men and by almost 15 years for women since 1940. This increase in longevity has also placed a greater strain on Social Security’s finance. A gradual, phased-in increase in the full retirement age, while leaving the early retirement age at 62 years, can help strengthen Social Security for future generations. There would be common-sense exceptions for those in labor-intensive jobs, such as mining.

Institute Blended Indexing to Improve the Solvency of Social Security

Under current law, Social Security benefits are paid out based on the rate of U.S. wage growth that occurred during the worker’s years of employment. Changing how benefits are calculated based on a system of blended indexing would allow Social Security to grow for the next generation of Americans. Under a blended index, low-wage earners, in addition to those in or near retirement, would continue to receive the present schedule of Social Security benefits. Benefits for high-wage earners would be based on the rate of U.S. price growth that occurred during the workers’ years or employment, while benefits for middle earners would be based on a combination of wage and price indexing. Because wages grow more than one percent faster than prices per year, it is estimated that blended indexing could close 70 percent of the long-term deficit of Social Security.